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THE EFFECT OF ORGANIZATIONAL CAPABILITIES TOWARDS R&D PROJECT INNOVATION

PERFORMANCE E&E MANUFACTURING FIRM

CHEE WEI KEUNG

DOCTOR OF BUSINESS ADMINISTRATION UNIVERSITI UTARA MALAYSIA

JUNE 2020

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THE EFFECT OF ORGANIZATIONAL CAPABILITIES TOWARDS R&D PROJECT INNOVATION PERFORMANCE E&E MANUFACTURING FIRM

CHEE WEI KEUNG By

Thesis Submitted to

Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia,

in Partial Fulfillment of the Requirement for the Doctor of Business Administration

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PERMISSION TO USE

In presenting this dissertation in fulfillment of the requirements for a Post Graduate degree from the Universiti Utara Malaysia (UUM), I agree that the Library of this university may make it freely available for inspection. I further agree that permission for copying this dissertation in any manner, in whole or in part, for scholarly purposes may be granted by my supervisor(s) or in their absence, by the Dean of Othman Yeop Abdullah Graduate School of Business where I did my dissertation. It is understood that any copying or publication or use of this dissertation parts of it for financial gain shall not be allowed without my written permission. It is also understood that due recognition shall be given to me and to the UUM in any scholarly use which may be made of any material in my dissertation.

Request for permission to copy or to make other use of materials in this dissertation in whole or in part should be addressed to:

Dean of Othman Yeop Abdullah Graduate School of Business Universiti Utara Malaysia

06010 UUM Sintok Kedah Darul Aman

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v ABSTRACT

Past literature indicates an unclear relationship between organizational capabilities and project innovation performance. This study investigated the impact of organizational capabilities on Research and Development (R&D) project innovation performance of manufacturing firms to fill the gap in the literature. In this study, the researcher proposed a framework where technological, marketing, customer relationship management, and management capabilities were hypothesized to enhance R&D project innovation performance. Four research hypotheses, underpinned by research- based view (RBV), were formulated to conduct the study. The study was a cross- sectional study which employed an online survey, and was conducted in Electronic and Electrical (E&E) manufacturing firms in Penang, Malaysia. Data from 56 responses were used to test the hypotheses by using regression analysis. The result indicated that marketing and management capabilities had a significant positive impact on R&D project innovation performance. However, unexpectedly, customer relationship management and technological capabilities did not show a significant effect on R&D project innovation performance. Of the significant predictors of innovation performance, management capabilities were found to be the strongest contributor, and it follows by marketing capabilities. The present study allows researchers and practitioners to gain an in-depth knowledge about the effect of management and marketing capabilities on the R&D project innovation performance in manufacturing firms. Practitioners are suggested to enhance their organization marketing and management capabilities to boost their R&D innovation project performance. As the study considered E&E manufacturing firms in Penang only, the generalizability of the findings could be limited. Future studies may consider expanding the research to the whole of Malaysia.

Keywords: Manufacturing firm, Organization capabilities, R&D project, innovation, E&E industry.

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vi ABSTRAK

Sorotan kajian telah menunjukkan hubungan yang kurang jelas antara keupayaan organisasi dan prestasi inovasi projek. Kajian ini bertujuan menyelidik impak keupayaan organisasi terhadap prestasi inovasi projek Penyelidikan dan Pembangunan (R&D) firma pembuatan untuk mengisi jurang kajian. Dalam kajian ini, rangka kerja yang melibatkan keupayaan pengurusan teknologi, pemasaran, perhubungan pelanggan, dan pengurusan dihipotesiskan untuk meningkatkan prestasi inovasi projek R&D telah dicadangkan. Empat hipotesis penyelidikan yang disokong oleh pandangan berasaskan penyelidikan (RBV) telah dirumuskan. Kajian ini adalah kajian rentas yang menggunakan kaji selidik dalam talian, dan telah dijalankan di firma perkilangan Elektronik dan Elektrik (E&E) di Pulau Pinang, Malaysia. Data daripada 56 responden digunakan untuk menguji hipotesis dengan menggunakan analisis regresi. Hasil analisis menunjukkan bahawa keupayaan pemasaran dan pengurusan mempunyai kesan positif yang signifikan terhadap prestasi inovasi projek R & D. Walau bagaimanapun, keupayaan pengurusan hubungan pelanggan dan keupayaan teknologi tidak menunjukkan kesan yang signifikan terhadap prestasi inovasi projek R&D.

Antara peramal penting dalam prestasi inovasi, keupayaan pengurusan didapati menjadi penyumbang terkuat. Ini diikuti oleh keupayanan pemasaran, penyumbang yang kedua kuat. Kajian ini membolehkan penyelidik dan pengamal dalam sektor ini mendapat pengetahuan yang mendalam mengenai kesan keupayaan pengurusan dan pemasaran terhadap prestasi inovasi projek R&D di firma pembuatan. Selain daripada itu, kajian ini mncadangkan pengamal supaya menguatkan keupayaan pengurusan dan pemasaran di organasi mereka untuk mencapai prestasi innovasi project R&D yang lebih baik. Oleh kerana kajian ini hanya mengambil kira firma-firma perkilangan E&E di Pulau Pinang, kebolehdapatan penemuan adalah terhad. Oleh itu, disarankan untuk mempertimbangkan perluasan penyelidikan ke seluruh Malaysia untuk kajian pada masa hadapan.

Kata Kunci: Firma pembuatan, keupayaan organisasi, projek R&D, inovasi, industri E&E.

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ACKNOWLEDGEMENT

I want to thank my supervisor, Associate Professor Dr. Asmat Nizam Abdul Talib, for his excellent guidance, commitment, positive and constructive feedback from day one till completion of this dissertation. His humble and fatherly traits are best for my lifelong learning. I am glad to have him as my supervisor for this subject. Besides, I feel grateful to all UUM professors and administrative staff of OYAGSB who coached and guided me in this DBA program. I also like to show my gratitude to my classmates, who worked hard together with me to complete the DBA program. Finally, my sincere thanks go to my family. They have been very supportive of letting me focus on my DBA study. The study would not be completed without all the supports, care, and understanding from my family members. They have been a great motivational force to keep me going through this journey.

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TABLE OF CONTENTS

TITLE PAGE i

CERTIFICATION OF DISSERTATION WORK ii

PERMISSION TO USE iv

ABSTRACT v

ABSTRAK vi

ACKNOWLEDGMENT vii

TABLE OF CONTENTS viii

LIST OF TABLES xi

LIST OF FIGURES xii

LIST OF APPENDICES xiii

LIST OF ABBREVIATIONS xiv

CHAPTER ONE INTRODUCTION

1.0 Introduction 1

1.1 Background of the Study 1

1.1.1 Overview of Malaysia Electronics and Electrical Industry 7 1.1.2 Overview of Penang Electronics and Electrical Industry 8 1.1.3 R&D Project Innovation Performance Measure 10

1.1.4 Organization Capabilities 12

1.2 Problem Statement 13

1.2.1 Organization Technological Capabilities 16

1.2.2 Organization Marketing Capabilities 17

1.2.3 Organization Customer Relationship Capabilities 18

1.2.4 Organization Management Capabilities 19

1.3 Research Questions 20

1.4 Research Objectives 21

1.5 Significance of the Study 21

1.6 Scope and Limitations 23

1.7 Definition of Key Terms 23

1.8 Organization of the Thesis 25

CHAPTER 2 LITERATURE REVIEW

2.0 Introduction 27

2.1 R&D Project Innovation Performance 27

2.2 Malaysia Electronics and Electrical Industry 34

2.3 Penang Electronics and Electrical Industry 36

2.4 Technological Capabilities 38

2.5 Marketing Capabilities 41

2.6 Customer Relationship Management Capabilities 43

2.7 Management Capabilities 46

2.8 Theory Underpinning the Study 49

2.9 Organizational Capabilities and R&D Project Innovation

Performance 53

2.9.1 Technological Capabilities and R&D Project Innovation

Performance 53

2.9.2 Marketing Capabilities and R&D Project Innovation

Performance 55

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2.9.3 Customer Relationship Management and R&D Project

Innovation Performance 56

2.9.4 Management Capabilities and R&D Project Innovation

Performance 57

2.10 Conclusion 59

CHAPTER 3 RESEARCH FRAMEWORK

3.0 Introduction 60

3.1 Research Framework 60

3.2 Hypothesis Development 61

3.3 Research Designs 62

3.4 Operational Definition 63

3.5 Measurement of Variables/Instrumentations 72

3.6 Population and Sampling 73

3.7 Data Collection Procedures 74

3.8 Techniques of Data Analysis 75

3.8.1 Demographic and Organization Factors Analysis 75

3.9 3.10

3.8.2 Factor Loading and Reliability Analysis 3.8.3 Multicollinearity Diagnostics Analysis 3.8.4 Descriptive Statistics Analysis 3.8.5 Correlations Analysis

3.8.6 Regression and Hypotheses Testing Analysis Pilot Test

Conclusion

75 76 76 76 77 77 78 CHAPTER 4 RESULTS AND DISCUSSION

4.0 Introduction 79

4.1 Descriptive Statistics of the Data 79

4.2 Factor Analysis and Reliability Tests 82

4.2.1 Factor Analysis 82

4.2.1.1 Independent Variables Factor Loading Analysis 83 4.2.1.2 Dependent Variables Factor Loading Analysis 88

4.3 Normality Test and Homoscedasticity 90

4.4 Reliability Analysis 92

4.5 Correlation Analysis 92

4.6 Multiple Regression for Dependent Variable 94 4.6.1 Model Summary for Dependent Variable Analysis 94

4.6.2 ANOVA Analysis 96

4.6.3 Coefficients Table Analysis 96

4.6.4 Multiple Regression Hypothesis Test Results 98

4.7 Discussion of Results 99

CHAPTER 5 CONCLUSION AND RECOMMENDATION

5.0 Introduction 102

5.1 Overview of the Study 102

5.2 Theoretical Implications 104

5.3 Practical Implications 105

5.4 Limitations of the Study 109

5.5 Recommendations for Future Research 110

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5.6 Conclusion 111

REFERENCES 113

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LIST OF TABLES

Table 3.1 Technological Capabilities Variables, Measurement Items, and

Scales 63

Table 3.2 Marketing Capabilities Variables, Measurement Items, and

Scales 65

Table 3.3 Customer Relationship Management Capabilities Variables,

Measurement Items, and Scales 67

Table 3.4 Management Capabilities Variables, Measurement Items, and

Scales 69

Table 3.5 R&D Project Innovation Performance Variables, Measurement

Items, and Scales 71

Table 3.6 Variables Reliability Measurement Results 77 Table 4.1 Respondents' Demographic of Main Survey 80 Table 4.2 Respondents' Organization Profile of Main Survey 81 Table 4.3 Descriptive Statistics of the Variables 82 Table 4.4 Independent Variables KMO and Bartlett's Test Table 83 Table 4.5 Independent Variables Communalities Table 84 Table 4.6 Independent Variables Total Variance Explained 85 Table 4.7 Independent Variables Rotated Component Matrix Table 87 Table 4.8 Dependent Variable KMO and Bartlett's Test Table 88 Table 4.9 Dependent Variable Communalities Table 89 Table 4.10 Dependent Variable Total Variance Explained Table 89 Table 4.11 One sample Kolmogorov Smirnov Normality Test Results 90 Table 4.12 Variables Reliability Measurement Results 92

Table 4.13 Description of Correlation Values 93

Table 4.14 Variables Correlation Test Results 94

Table 4.15 Research Model Summary 95

Table 4.16 ANOVA Table Analysis 96

Table 4.17 Coefficients Table Analysis 97

Table 4.18 Hierarchical Multiple Regression Analysis 98 Table 4.19 Summary of Research Objectives and Hypothesis Testing 99 Table 5.1 Overview of Research Questions and Hypothesized Relationship

between Organizational Technological, Marketing, Customer Relationship Management, Management and R&D Project Innovation Performance in E&E Manufacturing firms Penang Malaysia

104

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LIST OF FIGURES

Figure 1.1 Total Malaysia Companies under Forbes Asia’s 200 Best under a

Billion List 3

Figure 1.2 Total Malaysia R&D Expenses from 2014 to 2016 (MYR) 4 Figure 1.3 Total Malaysia R&D Headcounts from 2014 to 2016 5 Figure 1.4 Malaysia R&D Intellectual Property Output (Patent Awarded)

from 2014 to 2016 5

Figure 1.5 Country Comparison for High Technology Exports Values 15 Figure 2.1 2015-2018 E&E Products Export Values 36

Figure 3.1 Proposed Research Framework 61

Figure 4.1 Scree Plot of Independent Variables 86

Figure 4.2 Scree Plot of Dependent Variables 90

Figure 4.3 Homoscedasticity Scatterplot 91

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LIST OF APPENDICES

Appendix A Research Questionnaires 136

Appendix B Web-based Research Questionnaires 144

Appendix C SPSS Data Analysis Results 161

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LIST OF ABBREVIATIONS CEO - Chief Executive Officer

E&E - Electronic and Electrical FDI - Foreign Direct Investment GDP - Gross Domestic Product

HR - Human Resource

IP - Intellectual property

MyIPO - Intellectual Property Corporation of Malaysia IPVT - Intellectual Property Valuation Training IOT - Internet of Things

LED - Light Emitting Diode

MIDA - Malaysian Investment Development Authority MNCs - Multinational Companies,

NPD - New Product Development PLS - Partial Least Squares

PEB - Proactive Entrepreneur Behavior R&D - Research and Development RBV - Resource-based view

SME - Small to Medium Size Enterprise

SIRIM - Standard and Industrial Research Institute of Malaysia SPSS - Statistical Package for the Social Sciences

TRIPS - Trade-Related Aspects of Intellectual Property Rights WIPO - World Intellectual Property Organization

WTI - World Trade Institute WTO - World Trade Organization

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CHAPTER ONE INTRODUCTION

1.0Introduction

This chapter consists of eight sections. Section 1.1 illustrates the background of the study, which focuses on the overall view of Malaysia and the Penang E&E industry and also related innovation performance of organizations internationally. Section 1.2 explains the problem statement as well as the organization's technological, marketing, customer relationship management, and management capabilities towards the R&D project’s innovation performance. Section 1.3 and Section 1.4 list the research questions and objectives of the study, respectively, followed by Section 1.5, which states the significance of the study, and section 1.6 that spells the scope and limitations of the study. Section 1.7 defines the key terms used in the research. The chapter ends with section 1.8, which shows the organization of the thesis.

1.1 Background of the Study

Globalization enables humans, organizations, and countries to have close integration and interaction for global business and investment. It has introduced new industrial business processes and practices with more flexibility in forming global organizational functions. It mainly reduces the limitation of time and location for the business setup (Brondoni, 2018). The global network has substituted the serial product processes, systems, and supply chain. Without the need for sequential operations, the industrial product delivery time can fulfill all the operational units' logistics and manufacturing requirements in the global network more efficiently (Brondoni, 2014). Furthermore, industrial processes are not necessarily located in a dedicated location, and they are

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